Commercial property leases and the unknown impact of Brexit

An interesting and pinnacle case is about to go to court as to whether Brexit can frustrate a lease – bringing it to an end and releasing the parties from their obligations. Alexandra Savage, Commercial Property Solicitor, explains the facts of the case, which is due to be heard in January 2019 and could have an unquantifiable and extensive effect on UK landlords.

The issue has been raised as a result of the European Medicines Agency relocating its offices from London to Amsterdam due to Brexit. The landlord, Canary Wharf Group, is taking the EMA to court and is seeking a declaration that the UK’s withdrawal from the European Union will not result in the lease being frustrated. Thomson Reuters, Practical Law Company defines frustration as “where a serious event occurs which is both unexpected … and beyond the control of the parties to a contract, and which will make performance of the contract in the changed circumstances fundamentally different from performance under the contract that the parties originally entered into...”

If the court determines that the EMA is able to claim that their 25 year lease has been frustrated due to Brexit, this could have devastating implications for UK landlords in opening up the ability for European tenants to terminate their leases on ground of frustration; this would have severe financial implications for UK landlord. To put facts to theory, the rent bill for the remaining term of the EMA lease is estimated at £500 million.

We will be keeping a close eye on the court case and will keep our clients updated on any developments.  If you have any queries regarding your lease, or you are considering relocating your offices, you can contact Alexandra or the Commercial Property team on 023 9277 6561 or email alexandrasavage@warnergoodman.co.uk. 

ENDS

This is for information purposes only and is no substitute for, and should not be interpreted as, legal advice.  All content was correct at the time of publishing and we cannot be held responsible for any changes that may invalidate this article.